sales-tax-receipts-surge-statewide-filling-local-government-coffers

Sales Tax Receipts Surge Statewide, Filling Local Government Coffers

After receiving an extraordinary infusion of federal emergency aid, local governments across every region of the state raked in robust sales tax collections during the three months that ended on June 30th, according to a report issued Friday by the Comptroller’s Office.

State-wide, second quarter 2021 local sales tax collections rose 49 percent, or $1.6 billion, above the level collected from April-June 2020, during the depths of the pandemic. What’s more, every region of the state outside New York City collected at least 18 percent more than it did during the second quarter of 2019 – the comparable period prior to the pandemic. Specific sales tax revenue numbers for each of the state’s counties and regions can be viewed in tables accompanying the Comptroller’s report.

Friday’s data was also encouraging for the Big Apple. Local sales tax collections for New York City rose 44.6 percent relative to the year-ago quarter. While that remains 5.8 percent lower than the same period in 2019, its remarkable progress considering the unique toll the pandemic took there.

The chart below from the Comptroller’s report shows, for each New York region, how second quarter 2021 local sales tax receipts compare to the same quarter of 2020 and 2019.

The Comptroller identifies several temporary factors that likely spiked sales volume during the past quarter, including purchases related to the flood of recent home sales and the release of pent-up demand for in-person purchases. Also, implementation of sales tax revenue collection regimes for internet and intermediary taxes just prior to the onset of the pandemic lifted tax receipts from on-line purchases. On-line sales constitute a relatively higher share of purchases made by upstate residents and businesses, compared to those in New York City.

Another chart provides a longer look-back at sales tax revenue data for the past six quarters. It shows, despite the pandemic, local sales tax collections outside of New York City rose every  quarter except for the April-June 2020 period:

This illustrates how, outside of New York City, the overall downturn in sales tax receipts across the state during the past year and a half was not nearly as steep as had been feared. Sales tax receipts are a key source of local revenue—the primary such source for the state’s county governments.

It’s a major reason why the billions in emergency aid earmarked in March’s federal American Rescue Plan for local jurisdictions across New York State far exceed the amounts required to replace revenue lost from other sources.

And it’s what makes the federal emergency funds “house money” that local politicos can largely spend or invest as they see fit, within a few, limited statutory guardrails. We’ll address the disposition of those emergency funds by New York local governments in an upcoming post.

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